SPEECHES & TESTIMONY

Chilton Says Carbon Markets Need Sure-Footed Oversight

April 17, 2009

Even before legislation to address global warming has passed the U.S. Congress, government regulators are preparing for what could be the largest commodity market ever: carbon trading. The Congress is soon expected to consider climate change and energy legislation centered around a cap-and-trade system that intends to reduce American greenhouse gas emissions 20% by 2020, and 83% by 2050. Hearings on the legislation are expected to begin when Congress returns to Washington next week. “Regulation of these important environmental markets is something we need to get right,” said Commodity Futures Trading Commission (CFTC) Commissioner Bart Chilton who chairs an advisory committee addressing the subject.

The CFTC regulates futures markets and is expected to monitor and oversee the trading of derivative products associated with carbon dioxide allowances. Expanding upon last year’s energy committee, the Energy and Environmental Markets Advisory Committee, or EEMAC, which Chilton announced today, will significantly enhance the CFTC’s ability to anticipate and address regulatory issues pertaining to both energy and environmental trading markets.

“The mission, mandate and membership of the EEMAC is being expanded to ensure that we are ready for what could be a $2 trillion market in several years,” Chilton said, “we will have impressive experts who will help us as we try and figure out what needs to been done on day one after legislation becomes law.”

Since the 1990’s, the CFTC has regulated environmental markets like the sulfur dioxide market that came into existence after the passage of acid rain legislation. "We have a proven track record as a sure-footed regulator of environmental market for over two decades," the Commissioner noted.

The EEMAC, which up until now was focused on energy markets, will include a handful of new members with expertise in climate change and environmental markets. The first meeting will be held on May 13th at the CFTC's headquarters in Washington.

The European Union began a cap and trade system in 2005, yet has been laden with fits and starts including an initial overallocation of allowances which limited effectiveness. “I’m hopeful we in the US” can learn from the European experience to ensure that these markets take off in an orderly, efficient and effective fashion,” Chilton said. “It is too important to our economy and our world to get this right from the get go,” he said.